The ratings agency lowered Charter's rating to single-B from single-B-plus. Charter, the third-largest U.S. cable company, remains on CreditWatch with negative implications due to Charter's weak operating performance, S&P said.

Charter, which has made more than a dozen acquisitions in the past three years, has 6.7 million customers in 40 states and is controlled by
Microsoft Corp.
co-founder Paul Allen. On Monday, the company lowered its revenue and cash-flow outlook for the fourth quarter. Charter had about $18.5 billion total debt outstanding as of Sept. 30, according to S&P.

S&P said Charter remains on CreditWatch primarily due to uncertainty surrounding a continuing federal criminal investigation into the company's subscriber-accounting practices. Charter said Monday that it had fired its finance chief and chief operating officer, citing the federal criminal investigation. Although management changes may likely benefit the company in the longer term, they could be disruptive in the near term, S&P said.

"The downgrade follows Charter's issuance of lower revenue and cash-flow guidance for the 2002 fourth quarter. We are concerned that the competitive pressure that has eroded the company's basic subscriber base could continue," said Eric Geil, a credit analyst with S&P. "Charter may be challenged to achieve operating improvement needed to stabilize deteriorating credit measures and generate break-even free cash flow in 2003."

Charter lost about 86,000 basic subscribers in this year's third quarter, which slowed revenue and operating cash flow growth to 12.6% and 8.7%, respectively, S&P said. This performance was short of that delivered by other cable operators, the agency said.